This exercise applies the basic Ricardian model of one factor and two goods. The table below contains the unit labor requirements in Foreign and Home for each of two goods. Use this information to answer the question that follows.ChocolateWineaLw=3 hours per gallonLc 1 hour per poundaLc = 5 hours per poundwhere:HomeForeignO A. 0.050 pounds of chocolate.ⒸB. 1 pound of chocolate.OC. 0.25 pounds of chocolate.O D. 0.200 pounds of chocolate.aLC= number of labor hours needed to produce a unit of chocolate in Home;alw= number of labor hours needed to produce a unit of wine in Home;= number of labor hours needed to produce a unit of chocolate in Foreign;*aLw=4 hours per gallonaLC* = number of labor hours needed to produce a unit of wine in Foreign;alwPcPwthe price per pound of chocolate on world markets;the price per gallon of wine on world markets.Which of the following statements is true?O A. Home specializes in the production of chocolate and wine.O B. Foreign specializes in the production of chocolate and wine.O C. Home specializes in the production of wine.ⒸD. Foreign specializes in the production of wine.Suppose that Foreign uses an hour of labor to produce wine and then trades that output for chocolate. If Pc/Pw = 1, through trade Foreign can gain:

The Richardian theory, also known as the theory of comparative advantage, is an economic theory that…

where Home Foreign ac aw Chocolate Lc = 1 hour per pound aLC 5 hours per pound number of labor hours needed to produce a unit of chocolate in Home; number of labor hours needed to produce a unit of wine in Home; BLC = number of labor hours needed to produce a unit of chocolate in Foreign; a.*. = number of labor hours needed to produce a unit of wine in Foreign; aLW Pc = the price per pound of chocolate on world markets; Pw the price per gallon of wine on world markets. Wine alw = 3 hours per gallon aLw=4 hours per gallon Which of the following statements is true? OA. Home specializes in the production of chocolate and wine. OB. Foreign specializes in the production of chocolate and wine. C. Home specializes in the production of wine. D. Foreign specializes in the production of wine. Suppose that Foreign uses an hour of labor to produce wine and then trades that output for chocolate. If Pc/Pw=1, through trade Foreign can gain:

where Home Foreign ac aw Chocolate Lc = 1 hour per pound aLC 5 hours per pound number of labor hours needed to produce a unit of chocolate in Home; number of labor hours needed to produce a unit of wine in Home; BLC = number of labor hours needed to produce a unit of chocolate in Foreign; a.*. = number of labor hours needed to produce a unit of wine in Foreign; aLW Pc = the price per pound of chocolate on world markets; Pw the price per gallon of wine on world markets. Wine alw = 3 hours per gallon aLw=4 hours per gallon Which of the following statements is true? OA. Home specializes in the production of chocolate and wine. OB. Foreign specializes in the production of chocolate and wine. C. Home specializes in the production of wine. D. Foreign specializes in the production of wine. Suppose that Foreign uses an hour of labor to produce wine and then trades that output for chocolate. If Pc/Pw=1, through trade Foreign can gain:

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter20: Economic Growth

Section: Chapter Questions

Problem 31CTQ: As technological change makes us more sedentary and food costs increase, obesity is likely. What...

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As technological change makes us more sedentary and food costs increase, obesity is likely. What factors do you think may limit obesity?
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